Inflation was at its fastest for four years in July



  • The rise in the excise on beer increased the price level by 0.4 percentage points in July
  • Inflation stood at 3.6% in July according to Statistics Estonia and half of it was due to a 6.4% rise in food prices.

Core inflation, which shows price changes for manufactured goods and services, accelerated in July to 1.8%, mainly because of higher services prices.

The rise of food commodities prices on global markets, which started in mid-2016, has been passed into Estonian consumer prices to a significant extent. Prices for dairy products have risen especially fast, as the producer prices of butter continue to set new records on the EU market. Other food prices, especially those for fruit and vegetables, have however stabilised over the past months, as commodities prices are growing somewhat more slowly. Higher excise taxes caused a 21% price increase for the beer sold in shops, which affected the consumer price index in July by 0.4 percentage points.

The inflation in most euro area countries remained low in July at 1.3%. Rapid economic growth has not started to impact prices yet, as some euro area countries are underutilising their production capacity and inflation is also being held back by the appreciation of the euro. Since April, the euro has risen 8.5% against the US dollar. The strengthening of the euro has not caused fuel prices at filling stations to change much, although the price of a barrel of crude oil on global markets has risen from 46 US dollars to 52 in two months. The rise in the exchange rate of the euro is encouraging the prices of imported manufactured goods to fall, but it also slows down the growth of euro area exports.

Eesti Pank forecasts that inflation will continue to move at a fast pace until the end of the year. Prices should increase more slowly in the first half of next year, but still faster than the euro area average.

Inflation in the euro area remains low and rapid economic growth has yet to affect prices